Gold Seen Rising to $1,400 on 100-Day Average by Citi Futures

Gold prices are poised to extend
their 2014 rebound and reach $1,400 an ounce, the highest since
September, according to technical analysis from Citi Futures and
RBC Wealth Management.

Prices yesterday settled above the 100-day moving average
for a second straight day for the first time since October. The
metal has also closed above its 50-day measure in every session
since Jan. 23. The pattern signals prices will rally 8.5 percent
by the end of March, Chicago-based Sterling Smith of Citi
Futures said.

Turmoil in emerging markets and signs of waning improvement
in the U.S. job market helped drive gold prices 7.3 percent
higher in 2014 after after a 28 percent drop last year that was
the biggest since 1981. Bullion in New York yesterday capped the
longest rally since August 2012 after Federal Reserve Chairman
Janet Yellen said more work is needed to restore the labor
market.

“The sentiment seems to be changing gradually, and gold is
attracting bids,” Michael Gayed, the chief investment
strategist who helps oversee $250 million at New York-based
Pension Partners LLC, said in a telephone interview. “Money
printing will continue to help gold. I would say that some
people are returning to gold, and some are buying on technical
levels.”

Gold futures for April delivery climbed 1.2 percent
yesterday to $1,289.80, capping a fifth session of gains. The
100-day moving average is near $1,270.71.

RBC View

Prices will reach $1,400 by the end of the year if open
interest, or the number of contracts outstanding, starts to
rise, according to George Gero, a vice president at RBC Wealth
Management. The number of contracts yet to be closed, liquidated
or delivered dropped to 368,279 on Feb. 4, the lowest since
September.

“Once we see more investors return to the market, prices
will start going higher,” Gero said in a telephone interview
from New York. “The technicals indicate that there is some
strength.”

Yellen pledged to scale back the Fed’s debt purchases
through “measured steps,” she said yesterday in testimony to
the House Financial Services Committee.

Gold Record

Bullion jumped more than 500 percent in the 12 straight
years of gains through 2012. The rally accelerated from December
2008 to June 2011 as the Fed expanded its balance sheet through
debt purchases and held borrowing costs at a record low in a bid
to revive growth amid a U.S. recession. The metal reached a
record $1,923.70 in September 2011.

Gold dropped into a bear market in April as some investors
lost faith in the metal as a store of value amid a rally in
equities and muted inflation. Bullion held in global exchange-traded products slumped 33 percent in the past year, wiping
$66.3 billion from the value of the assets.

While prices in New York are heading for a second straight
month of gains, Morgan Stanley analysts including Joel Crane see
“more pain to come” for gold investors, they said in a report
Jan. 22. The bank cut its 2014 target 12 percent to $1,160.
Goldman Sachs Group Inc. sees prices at $1,050 in the next 12
months, the bank said in a Jan. 12 report.

“While we have seen some repair, it’s very early to call
it a recovery,” Walter “Bucky” Hellwig, who helps manage $17
billion at BB&T Wealth Management in Birmingham, Alabama, said
in a telephone interview. “We need money to start flowing back
into the market to see any meaningful change in outlook.”